Oil prices fell more than 1 percent on Wednesday after touching their lowest in nearly six years the previous session, extending losses alongside a sell-off in other commodities.
Commodities came under pressure after the World Bank cut its forecasts for global growth, reinforcing worries of a gloomy economic outlook at a time when oil markets are plagued by oversupply.
“There’s clearly a souring of sentiment towards industrial commodities and I think that’s spilling over to oil today,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.
February Brent crude LCOc1 had dropped 79 cents to $45.80 a barrel by 0726 GMT and West Texas Intermediate crude for February CLc1 was at $45.34, down 55 cents. Copper plunged to 5-1/2 year lows, while gold struggled to hold near a 12-week high on Wednesday. [GOL/] [METL/]
“It’s unusual to see the so-called safe-haven assets moving down with industrial commodities,” McCarthy said, adding that investors may be selling such assets on bets the European Central Bank could soon launch a new stimulus programme.
“Potentially this selling (in commodities) is now being overdone, but today there’s no sign of a turnaround,” he said.
Oil tumbled 5 percent on Tuesday, with global benchmark Brent briefly trading at par to U.S. prices for the first time in three months as some traders moved to take advantage of ample U.S. storage space.
Analysts said prices would stay under pressure as oversupply hurts both WTI and Brent, with some traders beginning to book ships for oil storage.
“Our latest forecast calls for Brent oil to average $45 per barrel during 1Q15 (the first quarter of 2015),” Nomura bank said on Wednesday.
Oil storage trends also imply further price falls, with U.S. stocks possibly approaching 80 percent of capacity by the upcoming spring season, according to U.S.-based PIRA Energy Group.
Commercial crude stockpiles in the U.S. rose 3.9 million barrels last week, according to industry group American Petroleum Institute (API). The Energy Information Administration’s oil inventory report is due Wednesday at 1530 GMT. [API/S] [EIA/S]
Outside the United States, some of the world’s biggest oil traders have booked supertankers to store at least 25 million barrels at sea.
“Once floating storage starts, there is very little support on the downside for Brent spreads,” Energy Aspects said.
U.S. crude have been cheaper than Brent since 2010 as logistical constraints and soaring North American shale oil production pulled down prices while the rest of the world market remained more tightly supplied.
But with oil producer club OPEC deciding late last year to maintain its output despite slowing Asian and European economic growth and to defend its market share, including against surging U.S. competition, a glut has also appeared outside the United States, pulling down Brent prices close to U.S. levels.
“The closing gap looks to be solidifying Saudi Arabia’s strategy to curb shale production and protect market share,” ANZ bank said.